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UPDATE 4-Brexit back in crisis as UK threatens to undercut divorce pact

Mon, 7th Sep 2020 07:52

* UK plans to override parts of Brexit withdrawal agreement
- FT

* Johnson tells EU to agree trade deal by Oct. 15 or 'move
on'

* EU negotiator Barnier 'worried' about difficult talks

* Next negotiations planned for Tuesday
(Adds EU Commission chief)

By Guy Faulconbridge and Elizabeth Piper

LONDON, Sept 7 (Reuters) - Britain's tortuous divorce from
the European Union veered into fresh crisis on Monday after
London threatened to undermine the exit agreement unless free
trade terms are agreed by next month.

In yet another twist to the four-year saga since Britain
voted narrowly to quit the bloc, Prime Minister Boris Johnson's
government was reportedly planning new legislation to override
parts of the Brexit Withdrawal Agreement it signed in January.

That could potentially jeopardise the whole treaty and
create frictions in British-ruled Northern Ireland where special
arrangements had been made to avoid a hard border with Ireland
to the south that could be detrimental to a peace agreement.

Sections of the proposed internal market bill are expected
to "eliminate the legal force of parts of the withdrawal
agreement" in areas including state aid and Northern Ireland
customs, the Financial Times newspaper said, citing three people
familiar with the plans.

EU diplomats were aghast, cautioning that such a step -
leaked on the eve of new talks in London - would tarnish
Britain's global prestige and heighten chances of a tumultuous
final disentangling from the bloc on Dec. 31.

The report was neither confirmed nor denied by Britain.

A government spokeswoman said it would work to resolve
outstanding disagreements about Northern Ireland with the EU but
was considering fall back options. "We will always reserve the
right to act in the best interests of Northern Ireland and the
UK's internal market," she said.

"Our top priority is to preserve the huge gains from the
peace process and the Belfast (Good Friday) Agreement, as well
as protecting Northern Ireland's place in our United Kingdom."

Sterling fell against the dollar and
euro.

Britain left the EU on Jan. 31 but talks on a new trade deal
before the end of a status-quo transition arrangement in
December have snagged on state aid rules and fishing.

London has set a deadline of Oct. 15 to strike a deal.

"If we can't agree by then, then I do not see that there
will be a free trade agreement between us, and we should both
accept that and move on," Johnson was to say on Monday,
according to his office.

WHO WILL BLINK FIRST?

European diplomats said Britain was playing a game of Brexit
chicken by threatening to collapse the process and challenging
Brussels to blink first. Some fear Johnson may view a no-deal
exit as useful distraction from the coronavirus crisis.

Without a deal, about $900 billion annual trade between
Britain and the EU could be thrown into uncertainty, including
rules on everything from car parts and medicines to fruit and
data.

Some Brexit-supporting members of the ruling Conservatives
oppose the withdrawal agreement as threatening British
independence even if the two sides secure future trade ties.

There was surprise and anger on both sides of the Irish
border and in Brussels at the reported plan to undermine the
withdrawal pact.

"I trust the British government to implement the Withdrawal
Agreement, an obligation under international law & prerequisite
for any future partnership," said Ursula von der Leyen, head of
the European Commission.

"Protocol on Ireland/Northern Ireland is essential to
protect peace and stability on the island & integrity of the
single market," she added on Twitter.

Leaders of Northern Ireland's Sinn Fein and SDLP parties,
the region's two largest Irish nationalist groups, also
criticised the government's reported plan.

British Environment Secretary George Eustice said the
government was committed to implementing the Withdrawal
Agreement but some legal ambiguities needed to be tidied up over
the Northern Irish protocol.

"We are not moving the goal posts," he told Sky News.

EU chief negotiator Michel Barnier acknowledged anxiety but
declined to comment on the FT report. "I remain worried ... the
negotiations are difficult, because the British want the best of
both worlds," he told France Inter radio.

If no deal is agreed, Britain would have a trading
relationship with the bloc like Australia's, which would be "a
good outcome", Johnson was also to say on Monday.

Australia is negotiating a free trade deal with the EU to
improve its market access, but for now largely trades with the
bloc on World Trade Organization terms.
(Additional reporting by Paul Sandle in London, John Chalmers,
Jan Strupczewski and Gabriela Baczynska in Brussels, Benoit Van
Overstraeten in Paris;
Writing by Guy Faulconbridge;
Editing by Andrew Cawthorne)

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